Next year, in Jerusalem

That for 2006 was not one of the best budget speeches ever, in style or content. Its length taxed the listener, whether in the House or following the Prime and Finance Minister delivering it over the broadcasting media. It was too frequently punctuated with swipes at critics of the government and telling them what they should be saying.

The descriptive part was disingenuously selective, thus not making for real analysis of how the economy performed in the first nine months of 2005. The prescriptive part, the basic purpose of a budget speech, fell quite short of what is required as well as what the PM aimed for - motivating society in general and stimulating economic operators in particular.

Critics, particularly economists who try to separate the factual economic wheat from the partisan political chaff, clearly irk the PM. Not in a personal regard but because he feels their opinions dishearten public opinion. The error in the conclusion - mistaking the messenger for the message - is brushed aside.

Yet, the figures given on Tuesday night continue to say that the message of reality is hardly as rosy as one would wish it to be, both in economic as well as financial terms. Misreading the descriptive figures leads to potentially wrong prescriptions. For instance, the PM pegged much optimism on the indicator of the VAT take, higher than both a year ago as well as his estimate for 2005.

He might have looked a bit closer and related the increase in VAT receipts - Lm27 million - to the nominal rise in consumption - Lm20.8 million. Had all the higher outlay on consumption gone on goods and services levied at 18 per cent that would have increased the VAT yield by Lm3.744 million.

There were also signals of economic malaise which the PM chose not to highlight. The notion that, to motivate, one drums up the positives and looks away from the negatives, that one does not tell the whole reality, simply creates illusions and postpones whatever remedial action it may be possible to take.

The budget speech ignored the fact that tax revenue was below the government's forecast. In contrast to VAT, for instance, customs, excise and licence fee receipts declined. The overall shortfall (of Lm17.3 million) was more than made up through non-tax revenue but not necessarily from sustainable sources. The contradiction between lower social security contributions than expected and the claimed throbbing tempo of economic activity was not looked at in the eye.

The forecast of 3.1 per cent inflation during 2006 is bad news for lower income groups. It is worrying for employers. Such a rise in prices would translate into a Lm2 weekly statutory wage increase from January 2007. Part of that - 50c - is included in the Lm2.25 adjusted rise announced by the PM in the speech, a measure which will accelerate the rise in cost and, on its own, feed inflation.

A combined increase of Lm4.25 in the space of 12 months is not a recipe for improved competitiveness. Nor is forecast economic growth of 1.1 per cent in real terms heartening.

Positive growth needs to go on quite a higher trend line. External factors, beyond the influence of any government, constrain that basic objective. Nevertheless, there needs to be some domestic policy response. The PM's stress on promoting research and development, science and technology, was one of the better aspects of the budget programme, along with an undertaking to review and revise the cost of bureaucracy and move decisively towards pension reform.

The limited policy instruments available for more immediate impact were ignored. One seriously hopes that no one really believes introducing a final withholding tax on capital gains from property is an economic stimulant.

The PM titillated, in the media feasting after the speech, with Next year, in Jerusalem suggestions of tax cuts. That will be the start of the build-up towards a mid-summer 2008 general election. Meanwhile, the economy and the people still have to deal with the here-and-now. However good the intentions, the budget measures do not quite grapple with that hard challenge.